Facebook: Time To Like It (Apologies For The Pun) [View article]
Famous last words before the entire index crashes. Just because something else is trading at a high multiple doesn't mean FB is worth it on an absolute basis. You've heard the saying, "Would you jump off a bridge if everybody does too?" Not to mention their growth is plateauing. Where else to go from here?
Dell: A Growth Story In Deep Value Territory [View article]
I don't follow the reasoning. if FCF is a mirage and all their acquisitions for the last decade were junk, why did DELL have record FCF last year? Last year's FCF is a product of invested capital from years prior. DELL has done something right.
Dell: A Growth Story In Deep Value Territory [View article]
I could estimate organic rates, but that would preclude acquisitions. I dont see any indication they will stop acquiring, what with the net cash position, strong cash flows, and goals of becoming a premier enterprise solution.
Adding the cash doesn't necessarily mean I'm assuming they don't acquire. You're forgetting about the annual $3-$5 billion in FCF that can also be invested/used for acquisitions.
I suppose some may say not to assume acquisitions to be conservative, but I try to forecast accurately and then use conservatism on the purchase decision and margin of safety side of things. In this case, a possible 130% upside is a huge MOS.
Dell: A Growth Story In Deep Value Territory [View article]
HJ, thanks for the compliments. Very good points about the lack of insider buying and the leverage. As far as insider buying, yes, I would definitely like to see less dumping and more buying, however, the most important insider of all (Dell) bought last year and prior to that at a higher cost basis than today's prices and owns nearly a fifth of the company. As far as the leverage, I agree to an extent. I normally dislike debt, but in Dell's case, I like what they're doing. They've increased their debt burden recently to take advantage of cheap money and then use their cash for smart acquisitions. I think their strong cash flows more than counteract those effects. The interest coverage is still 23.19.
Thuangster, someone had caught that earlier as well. The original analysis was done when Yahoo had initially planned to do a tax-free asset swap. Now that they aren't, that number should come down. You are correct. Good catch guys. The conservative estimates on the core business of Yahoo I think should compensate for this, though. For one reason, the number used to value core Yahoo at $3 per share was Net Income, while FCF yields a higher valuation. Bottom line, I'm still bullish.
The 3% growth came from a base case assumption that YHOO at least grows alongside GDP, no better, no worse, just a conservative assumption. Please don't read too far into it. What I'm trying to convey is Mayer should have mediocre performance, at least.
Proper discount rate has been debated for decades and will not end with this article. At the risk of financial heresy, I use the same discount rate across all my equity analyses in order to compare apples to apples when looking to invest. In this way, it is used more as a hurdle rate that a discount rate. I pick 12% because it is higher than the long term total return of the market, but is not so high that it renders all analyses as "overvalued". Even one percentage point can throw even the same analysis so far out of whack that I feel it's best to stick with one so that you have a set measuring stick. Using one discount rate for one analysis, then using another for another analysis is faulty in my opinion, because risk or uncertainty should not be mitigated by using a higher discount rate, but rather by requiring a lower price.
Seriously, Can Hewlett-Packard Be This Cheap? [View article]
Loving the comments and the community here. For the most part it's been an objectively critical debate, and that is specifically why I like this site. I think I side with some of the earlier posters who mentioned there is so much unwarranted negativity surrounding this stock that I feel it's oversold. Yes, HP has its troubles. Yes, they will suffer declines in some of their respective segments. Yes, the executive suite has been a revolving door for the last several years. The company definitely needs to turn things around, and is by far and away no Apple. However, there is value to be found in both successful companies AND struggling companies. And at HPQ's current stock price, the market has expected complete and utter destruction and has completely given up on the stock. Anything better than death for this company (news release, unexpected product launch, decent quarterly results) will have an upward effect on the stock price. The risk/reward ratio here is too enticing.
Seriously, Can Hewlett-Packard Be This Cheap? [View article]
Of course you're correct - no one is always right. But a legendary value investor buying in, coupled with very large insider buys, a rock bottom multiple, solid cash flow, sustainable dividend, and reasonable earnings guidance all combined provide a risk-reward ratio that is tipped in my favor, in my opinion.
Seriously, Can Hewlett-Packard Be This Cheap? [View article]
Not sure I follow your logic. FCF growth is FCF growth, whether or not they experienced it from one core business or from several business segments. As a shareholder, I own all the segments, not just one.
It is ironic that the catalyst that I'm counting on to unlock value is the very asset that I would rather Yahoo hold onto. This stake in Alibaba should grow for some time. However, the analysis was done with the assumption a partial sale would occur, so it is factored in. Hence, nothing changes.
Apple's Institutional Slingshot: Rational Explanation Of Irrational Stock Action [View article]
Facebook: Time To Like It (Apologies For The Pun) [View article]
Dell: A Growth Story In Deep Value Territory [View article]
Dell: A Growth Story In Deep Value Territory [View article]
Dell: A Growth Story In Deep Value Territory [View article]
Adding the cash doesn't necessarily mean I'm assuming they don't acquire. You're forgetting about the annual $3-$5 billion in FCF that can also be invested/used for acquisitions.
I suppose some may say not to assume acquisitions to be conservative, but I try to forecast accurately and then use conservatism on the purchase decision and margin of safety side of things. In this case, a possible 130% upside is a huge MOS.
Dell: A Growth Story In Deep Value Territory [View article]
Seriously, Can Hewlett-Packard Be This Cheap? [View article]
Why Apple's iPhone Will Continue To Be Successful [View article]
Piecing Together Yahoo's Value [View article]
Piecing Together Yahoo's Value [View article]
Piecing Together Yahoo's Value [View article]
The 3% growth came from a base case assumption that YHOO at least grows alongside GDP, no better, no worse, just a conservative assumption. Please don't read too far into it. What I'm trying to convey is Mayer should have mediocre performance, at least.
Proper discount rate has been debated for decades and will not end with this article. At the risk of financial heresy, I use the same discount rate across all my equity analyses in order to compare apples to apples when looking to invest. In this way, it is used more as a hurdle rate that a discount rate. I pick 12% because it is higher than the long term total return of the market, but is not so high that it renders all analyses as "overvalued". Even one percentage point can throw even the same analysis so far out of whack that I feel it's best to stick with one so that you have a set measuring stick. Using one discount rate for one analysis, then using another for another analysis is faulty in my opinion, because risk or uncertainty should not be mitigated by using a higher discount rate, but rather by requiring a lower price.
Seriously, Can Hewlett-Packard Be This Cheap? [View article]
Seriously, Can Hewlett-Packard Be This Cheap? [View article]
Seriously, Can Hewlett-Packard Be This Cheap? [View article]
Piecing Together Yahoo's Value [View article]